Singapore shares rose 0.7 percent by midday on Monday in line with other Asian bourses, as investors picked up blue chip names with attractive dividend yields such as transport operator ComfortDelGro and StarHub .

However, gains in the benchmark Straits Times Index (STI) are likely to be capped at 2,900 points as investors remain cautious on concerns that the U.S. economy may slip into another recession.

At 0500 GMT, the STI was up 0.69 percent, or 19.60 points, at 2,870.19. The total volume of shares traded by then was 664.3 million shares and turnover was S$802.5 million.

This compares with the volume of 1.1 billion shares and turnover of S$1.2 billion on Friday.

"The markets look oversold, so this is more of a technical rebound. We continue to advise investors to look at oversold blue chips especially with defensive earnings and good dividends," said Carey Wong, an investment analyst at OCBC Investment Research.

He expects the STI to see more volatile trading in the 2,800-2,900 band in the near future.

"We don't see a sustainable recovery, the market would still be quite volatile going forward. As a whole, manufacturing in the U.S. is still not doing well and consumer sentiment is still down," Wong said.

ComfortDelgro shares were 4.4 percent higher at S$1.315 after it reported resilient earnings despite increased cost pressures, and as investors bought its shares for a 4.4 percent dividend yield ahead of its ex-dividend date on Aug 18.

Kim Eng Securities also upgraded ComfortDelGro to buy from hold with a target price of S$1.58.

Telecommunications firm StarHub , whose ex-dividend is also on the same date, rose 2.6 percent to S$2.75. It has a dividend yield of 7.5 percent.

However, casino operator Genting Singapore lost 2.9 percent after it reported a double-digit fall in earnings for the second quarter and lost market share to rival Marina Bay Sands.

Palm oil firm Mewah International plunged 12.6 percent to S$0.52 after it announced weak quarterly earnings that prompted several brokerages to downgrade its rating.

JPMorgan downgraded the company to neutral from outperform and cut its target price to S$0.60 from S$1.30. Read More